December 11, 2006

Stamp duty on sale of properties may come down significantly with the central government proposing that the levy should be imposed only on capital appreciation.
If the proposal is accepted, buyers will pay stamp duty only on the difference between the transaction value and the previous sale of the property concerned. As of now, stamp duty is paid on the entire value of the property concerned.
The proposal is likely to be taken up by the Cabinet shortly. If implemented, stamp duty on properties could be imposed only on a “value-added basis”. This will ensure that transaction costs are not too high, providing no incentive for evasion. However, implementation of the proposal will depend on its acceptance by the state governments.
If a developer buys a piece of land worth Rs 10 lakh and constructs a house on it and sells it for Rs 25 lakh, the stamp duty — according to the proposed policy — will only be on Rs 15 lakh, which happens to be the difference between the current transaction and the purchase value of the land. The move is part of the National Housing and Habitat Policy, which is to be considered by the Cabinet soon.
“The policy will favour group housing needs in a big way, as stamp duty will be imposed on a value-added basis at the stage of raw land and first sale,” said a senior government official. The government feels the policy will go a long way in addressing the inadequacies which dog real estate transactions. At present, due to the absence of any rules guiding the property transaction, developers charge stamp duty from end users according to their whims and fancies.
In the past, confusion over stamp duties was rampant, particularly in the development of housing colonies in Dwarka and Gurgaon. Around that time, various consumer groups had raised a strong demand for rationalisation of stamp duty in case of resale of properties.
Developers said the move was welcome and it will help in checking evasion of stamp duty. “The move will prompt group housing societies to put a stop on misdeclaration of property value, which is being done by developers in collusion with government agencies,” said DLF director Rajeev Talwar.